Below is a quick code block which is not compiled, tested, even not thought on it detailed...

void timer_interrupt() interrupt 0 {
   in = P2;
   delta = old_in ^ in;
   old_in = in;

   for (int i=0; i<4; i++) {
      delta = delta >> 1;

      // state change?
      if (CY) {
         state_flag[i] = 1;        
         in = in >> 1;
         val[i] = CY;
         counter[i] = 0;
         cntr_flag[i] = 0;
      } else
         in = in >> 1;

      // incr counter?      
      if (!flag[i]) 
         if (counter[i]++ == thresh[val[i]])
            cntr_flag[i] = 1;
   }
}

void main() {
   while (1) {
      for (int i=0; i<4; i++) {
         if (state_flag[i] || cntr_flag[i]) {
            // diable interrupt
            state_flag[i] = cntr_flag[i] = counter[i] = 0;
            // enable interrupt

            process_event(i); // do whatever you want
         }
      }   
   }
}

is it completely garbage?